The applicants sought summary judgement regarding a default of a loan agreement and mortgage in Permanent Custodians Limited v Sanders [2017] VSC 516. Due to unserved further material being filed by the defendant just prior, a further hearing was conducted in Perpetual Trustees Victoria Limited v Sanders [2017] VSC 555.
The defendant denied his entry into the loan agreement, the giving of the mortgage or the advancement of the loan, and therefore denied being in default (at 32 in 516, at 30 in 555). As a counterclaim, he contended that even if that agreement and default were established, by delivering a promissory note he had ensured there was no default under the agreement, and Perpetual’s failure to present the promissory note for payment or to return it to him within 3 days was a deemed acceptance of the promissory note, such that he was released from any liability to Perpetual, if such liability existed (at 32 in 516, at 68 in 555). The defendant also made claims for $2 million in damages arising out of breach of contract, alleged to have arisen from Perpetual’s failure to accept the Promissory Note (at 93 in 516, at 88 in 555) as well as charges of trespass.
The defendant further submitted that the advance was not made as he was not given money, gold or silver coins, but instead was given credit, which he described as “just zeros on a computer” (at 44 in 516, at 49 in 555):
“Any information can be entered into a computer system especially with many terminals as to the correctness, truth and reliability of that information that’s another question, just like how credit or debt is created is it just key strokes on a computer keyboard with nothing of substance backing it up from a particular party (like conjure money out of thin air).”
Instead, he contended the advance had not occurred as he had funded the loan himself, through putting his “wet ink signature” on the loan application form (at 45 in 516, at 50 in 555).
The defendant challenged the jurisdiction of the Court to hear the matter, submitting that the powers to make laws with respect to bills of exchange and promissory notes and to banking were reposed in the Commonwealth Parliament, and not the States, and that therefore a State court did not have jurisdiction to deal with the matters raised in this proceeding (at 20 in 516, at 17 in 555).
Matthews JR noted (at 58-59, 66 in 516) the words at the bottom of the Promissory Note: “Memo: Issued pursuant to P.L. 73-10 (See H.J.R. 192 dated June 5, 1933) and/or its Australian equivalent, The Financial Emergencies Acts” and cited the similarity to that ANZ v Evans [2016] NSWSC 1742, where Garling J held that to contend that such a promissory note excused the defendant from repaying his substantial liability was “a nonsense” (at 50) and noted (at 35) the following in this respect:
“So far as can be ascertained, this is a reference to a piece of US legislation being a 1933 act entitled “Public Law 73-10”, and to a House Joint Resolution of the US Congress passed in 1933, being that numbered 192. There has been no “Financial Emergencies Act” in Australia. That seems to be a reference to a piece of US legislation.”
It was noted (at 67-68 in 516) that the defendant in this case and in ANZ v Evans had also relied on the statement by Lord Denning MR in Fielding and Platt Ltd v Najjar [1969] 2 All ER 150 (at 152) that:
“We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary.”
Fielding and Platt Ltd v Najjar concerned a contract which called for promissory notes and stipulated that they constituted payment. Garling J in ANZ v Evans (at 50) viewed it as “illogical and incorrect as a matter of legal principle” to take that statement out of context and then seek to apply it in the way the defendant did in that case.
The situation in Hou v Westpac Banking Corporation [2015] VSCA 57 was also noted (at 65 in 516) as relevantly similar in that the appellants in that case relied on a purported “bill of exchange” to say they had discharged their debt to the bank, and that the Court of Appeal observed (at 68): “It is hard to believe the appellant could have honestly believed such a transparent device could have any legal effect”.
As to the defendants claim of breach of contract, it was noted (at 93 in 516) that Garling J considered a similar “contract” which was said to have arisen in a similar way in ANZ v Evans. His Honour states (at 53) that: “Silence or inaction on the part of a party cannot, where no consideration passes, transform a unilateral demand into a contract. Even less can it constitute a breach of some self-invented contract.’” and concluded (at 155) that:
“This process of imposing a contract, in the absence of consideration, let alone any conduct on the part of the recipient parties indicating acceptance, is not founded on any principle of law. It is not open to a person in the position of [the defendant] to impose a contract, and contractual terms, on other parties in the way he asserts. The document itself is meaningless.”
Matthews JR was satisfied that Perpetual had established its entitlement to payment of the outstanding amount and to possession of the property, that the promissory note was not a defence to Perpetual’s claim, and there was nothing in the counterclaim capable of being employed as a defence which has a real prospect of success. The applicants application for summary judgment was granted.